When a contract dispute between a public authority and a private party proceeds to arbitration, can the private party inquire into the process or reasoning that led to public authority’s decision in question? For instance, if the public authority decides to terminate a construction contract, or to award a tender to one bidder, can an arbitral tribunal compel the public authority’s decision-makers to testify about their decision-making process?

It might be argued that this sort of inquiry is irrelevant and impermissible because the public authority is making a public law decision for which the publicly released decision is all that is relevant, and the reasons of the decision-makers within the public authority are unknowable; and the arbitral tribunal is there to make the determination as to whether the decision was valid or not, not what the decision-makers within the public authority thought about the matter.

However, in Commission scolaire de Laval v. Syndicat de l’enseignement de la région de Laval the Supreme Court of Canada has just held that the arbitrators may summon the decision-makers within a public authority, and the arbitrator may receive evidence about the process leading to the decision that is relevant to the arbitration. And in its decision, the Supreme Court made strong statements about the inadvisability of any court interfering beforehand in the arbitrator’s role in making these evidentiary rulings.

While the decision was rendered within an employment context, it raises serious issues about the powers of arbitral tribunals to inquire into the motives and the processes of public authorities. Combined with the recent decision of the Supreme Court in Bhasin v. Hrynew, which has mandated the honest performance of contracts, it could very much broaden the powers of arbitral tribunals to look behind the decisions of public authorities relating to the performance of contracts.

Background

B was a vocational training instructor employed by the Laval School Board since 2000. In March 2009, the principal of the school where B worked asked B to submit a declaration concerning his judicial record. As a result of recent amendments to the Quebec Education Act, (EA) a school board was required to “ensure” that “persons who work with minor students and persons who are regularly in contact with minor students . . . have no judicial record relevant to their functions within that . . . board.” If a school board notes that a teacher or a person holding a teaching licence has a record it considers relevant to that person’s functions, it must inform the Minister of Education and the Minister may refuse to renew the teacher’s licence or may suspend or revoke it or attach conditions. That power cannot be exercised, however, if the teacher’s offence is unrelated to his or her employment or if a pardon has been issued to the teacher.

In June 2009, B was summoned to attend a special meeting of the Board’s executive committee. The Supreme Court of Canada said the following about that meeting:

“After hearing B in a “partially in camera meeting” (from which the public was excluded), the executive committee ordered a “totally in camera meeting” (from which the teacher and his representative were excluded) in order to deliberate. Upon completion of these two in camera meetings that lasted a total of 27 minutes, the committee, sitting in public once again, proceeded to adopt resolution No. 238, which terminated B’s employment contract.”

This resolution listed the offences of which B had been convicted, noted [translation] “the provisions of the [EA] concerning judicial records of persons who work with minors” and mentioned the recommendations of the human resources unit and the director general that B’s record was relevant to his functions. The executive committee unanimously decided that “the employment relationship between the teacher [B] and the Board [is] resiliated as of this day on the ground of incapacity”. In the Board’s view, the fact that a teacher has a judicial record that is relevant to his or her functions makes the teacher legally incapable of performing those functions.”

On July 2, 2009, the Union filed a grievance on B’s behalf to contest his dismissal. The collective agreement between the Union and the board stated that a teacher’s employment contract could be terminated “only after thorough deliberations at a meeting of the board’s council of commissioners or executive committee called for that purpose.”

On July 3, 2009, the day after the grievance was filed and four days after the employment relationship was terminated, the National Parole Board granted B a pardon.

The Union’s grievance on behalf of B came to an arbitration hearing in May 2010. The Union summoned three members of the executive committee who had been present for the deliberations in June 2009. The Board objected, arguing that the motives of the members of the committee were irrelevant and that doctrine of deliberative secrecy shielded the members from being asked what had been said in camera. The Union submitted that this testimony would be relevant, admissible and necessary, given that it contested both the procedures and the substantive grounds relating to the termination.

The Lower Decisions

The arbitrator held that Union was entitled to examine the members of the executive committee on what had been said in camera. In order to determine whether the committee’s deliberations had been “thorough” as required by the collective agreement, he held that it was necessary to know their substance, including what information had transmitted orally and in writing in the discussions between the members, as well as any objections that were raised.

The arbitrator held that the doctrine of deliberative secrecy did not preclude him hearing the evidence which the executive committee had heard in camera. The fact that a body deliberated in camera did not necessarily mean that it benefited from deliberative secrecy, and the mere fact that the executive committee had decided unilaterally to sit in camera did not shield its members from scrutiny by a grievance arbitrator. The arbitrator said that he would hear the evidence of the executive committee’s members in camera if he received a request to that effect, to ensure that they would be able to speak as freely as in their deliberations.

Mr. Justice Delorme J. heard a motion for judicial review of the arbitrator’s interlocutory decision. He held that the intentions of members of the executive committee’s decision to terminate B’s contract of employment were irrelevant. He also held that the executive committee’s decision to deliberate in camera had rendered its deliberations confidential.

By a majority, the Quebec Court of Appeal allowed the appeal. The majority held that a decision with respect to employment, and more specifically with respect to dismissal, made by a public body falls under employment law, whether individual or collective, and not under public law. The rule that deliberative motives are irrelevant did not apply. The majority of the Court of Appeal also held that deliberative secrecy did not apply since the executive committee was not an adjudicative body, and the fact that the executive committee decided unilaterally to meet in camera did not shield its members from testifying.

The dissenting judge would have dismissed the appeals. He held that the rule against the admissibility of the motives of public decision-makers applied to the decisions of any public collective decision-maker, whether acting in a private or public capacity, provided that the communicated decision officially expresses the public body’s will.

Decision of the Supreme Court of Canada

The Supreme Court of Canada unanimously dismissed the appeal. The majority and minority of the Supreme Court were divided on which standard of review to apply. That issue is not one that this article will address. On the other issues, the court held as follows:

The rule that the motives of a public decision-maker are irrelevant and “unknowable” (known as the Clearwater principle from a decision of the Supreme Court) applies to a legislative body, or a public body exercising regulatory, policy or purely discretionary powers. But that rule does not apply to any decision of a public authority in a contractual or other private law context.

In this respect, the Supreme Court did not draw a dividing line between employment cases and other cases. Rather, it drew the dividing line between decisions of a legislative, regulatory and pure policy nature, on the one hand, and decisions relating to the assertion of private law rights, on the other. Decision-makers within a public body that was involved in contractual or other private law matters were subject to testifying about their deliberations, if their testimony is relevant.

On this point, the reasons of the Supreme Court are important:

“…it is wrong to say that Clearwater established a rule of relevance that applies to every collective decision made by a decision‑making body by means of an official document regardless of the nature of the decision or of the body making it. Rather, the “unknowable” motives in question are those that led a legislative body to adopt provisions of a legislative nature, that is, to carry out acts of a public nature….[the Clearwater rule] applies to decisions made by a public body when it carries out acts of a public nature. (emphasis added)

In the instant case, even though the Board is a legal person established in the public interest under the EA, it was acting as an employer when it decided to dismiss teacher B by way of a resolution of its executive committee. That decision had an effect on the employment contract between B and the Board and was made in the context of a process provided for in the collective agreement between the parties. It was not a decision of a legislative, regulatory, policy or discretionary nature.Rather, it was made in the context of the very type of contractual relationship that was at issue in Dunsmuir and Wells. In reviewing such a decision, a grievance arbitrator applies the principles of employment law that are applicable to any dismissal. As a result, this case is clearly distinguishable from Clearwater. A rule of relevance based on the public nature of an impugned decision does not apply here.” (emphasis added)

The Supreme Court also noted the fine line between process, motives and substance in the making of a decision relating to private or contractual rights:

“Furthermore, it is quite hard to distinguish questions concerning the process that led to a decision from questions concerning the motives behind the decision. A single question could be useful for determining both whether the process was lawful and whether the disciplinary sanction satisfies the substantive requirements provided for in the collective agreement and in labour legislation. For example, the question whether the members of the executive committee considered the existence of B’s application for a pardon might be relevant to the assessment of the process followed by the committee. The same question might also be relevant to the assessment of the validity of the committee’s substantive decision.”

Finally, the Supreme Court noted that principles involved should apply equally to the private and public sector if contractual and other private-law rights are in issue. It said:

“In the appellants’ submission, Clearwater would apply not only to public bodies like school boards, but also to Crown corporations, all of which make their decisions known through resolutions adopted collectively by their decision‑making authorities. And the same rule would apply to private corporations that operate in the same way. If that were the case, the makers of a wide range of decisions made collectively would be shielded from ever testifying about their motives or their deliberations, even in cases in which such testimony would be of particular relevance to the dispute. It would not be desirable to attribute such a scope and such effects to the reasons of narrow scope given by Binnie J. in Clearwater.” (emphasis added)

The Supreme Court held that the members of the Board’s executive committee were not protected from testifying by the doctrine of deliberative secrecy. That doctrine only applied to a body exercising an adjudicative function, such as a court, arbitrator or administrative tribunal. The Board’s executive committee was not performing an adjudicative function. Rather, “it was acting as an employer in the context of a contractual relationship to which the principles of employment law applied.”

The Supreme Court declined to rule on whether the proposed examination of the executive committee members was relevant, for three reasons:

First, the assessment of relevance fell within the exclusive jurisdiction of the arbitrator, and it is “not open to a reviewing court to speculate about the types of questions that could be relevant before the examination has even begun”;

Second, the arbitrator had authority over both the substantive validity of the board’s decision, and the issue of the proper penalty;

Third, the arbitrator had to decide whether the Board had taken “thorough deliberations” as required by the collective agreement.

In concluding, the Supreme Court made two observations that are very relevant to the law of arbitration.

First, the court said that it was inadvisable for a court to review an interlocutory decision of an arbitral tribunal, particularly a decision about the relevance or admissibility of evidence. The court noted that such a review is not suitable to the process:

Finally, it seems to me self‑evident that the nature of arbitration proceedings would be unsuited to an advance assessment of testimony that has not yet been heard. Relevance is established on the basis of the legal framework, the factual context and the circumstances of the particular case: …..Owing to certain features specific to grievance arbitration, the legal framework and factual context often become known only as the proceedings and the examination of witnesses unfold.…..To the above must be added the informal nature of the pleadings that lead to arbitration and the absence of applications with detailed allegations that would be available to a court of law to help it determine what is relevant on the basis of the facts alleged in support of a proceeding. In this context, it would be risky to rule in advance on the relevance of evidence that could depend on what will be revealed in the course of the examination of the employer’s representatives….. Likewise, it would be inappropriate to preclude in advance all questions about the motives behind the dismissal. (emphasis added)

Second, the court also made the point that there are good policy grounds for disallowing review of the interlocutory decisions of arbitrators, as the present case illustrated:

“In concluding, I must make one final comment. In my humble opinion, it is most unfortunate that, more than six years after filing a grievance with respect to a dismissal, the Union has not yet been able to begin presenting its evidence. The mission of the grievance arbitration system, that is, to provide employers and employees with justice that is accessible, expeditious and effective, has been forgotten. I would note the importance of the sensible rule that, with only a few exceptions, a grievance arbitrator’s interlocutory decision, in particular one concerning evidence and procedure, is not subject to judicial review….The courts of several provinces have taken a similar deferential approach to interlocutory decisions of arbitrators….” (underlining added)

Discussion

This decision of the Supreme Court is important for the law of contracts, construction law and arbitration, and not just for employment law.

For arbitration law, The Supreme Court’s observation will undoubtedly confirm the modern approach to arbitration and the respect which court now give to arbitral awards and in particular the interlocutory decisions of arbitrators.

For contract and construction law, consider the situation in which a public body tenders a contract for the construction of a building. That tender process is governed by the law of contract, and particularly the law applicable to tenders. The public authority’s decision to award the building contract is governed the Supreme Court of Canada’s decision in Ron Engineering, and the many subsequent decision arising from that decision. An important element in the validity of that decision is the fairness of the decision of the public authority’s decision.

Consider also the recent decision of the Supreme Court of Canada in Bhasin v. Hrynew, in which the Supreme Court held that a party to a contract has a duty of honest performance. Whether a public authority has honestly performed the contract may be a serious issue, particularly in the authority’s use or mis-use of the change order regime and the dispute resolution process.

On these and other issues relating to the performance of contracts entered into by public authorities, the Laval School Boarddecision is a powerful statement. The decisions of public authorities in that context are not legislative, policy or regulatory decisions, but decisions made according to contract and other private law rules. The internal processes leading to those decisions will not be entitled to a blanket privilege against disclosure. The admissibility of evidence from the decision-makers will be determined by an arbitrator, if an arbitration agreement is applicable, and courts should be very reluctant to interfere with that process. The admission of evidence about the decision-making process of the public authority may well be in aid of an allegation of improper purpose or motive, or unfairness.